Robert Rennie, Research Analyst at Westpac, explains that they have shifted back to a neutral stance on the basis of firstly that the US$ had come a long way in a short period of time and that a number of technical objectives were close to being achieved e.g. 50% retracement of 114.73 November high to 104.56 March low coming in at 109.73.
“The other factor was last week’s FOMC which saw the arrival of a “symmetric” inflation target in the statement. To be sure, higher oil prices could add pressure to market-based FOMC rates pricing. However, outside of that, it’s hard to see where a major boost comes from. Thus, we err on the side of caution at 110 for another week.”
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